Proponents of consumer arbitration have been buoyed by a Ninth Circuit opinion issued on April 11, 2013, that underscores the dramatic impact that AT&T Mobility, LLC v. Concepcion has had on the enforcement of consumer arbitration agreements containing class action waivers.

The Ninth Circuit, en banc, ruled in favor of KeyBank, N.A., which had been sued in a putative class action by students of a failed flight-training school who sought broad injunctive relief related to their student loans. Reversing the district court, the Ninth Circuit enforced the class action waiver in the loan agreement’s arbitration provision. The court first rejected the plaintiffs’ contention that the class action waiver was unconscionable, holding that such a defense “is now expressly foreclosed by Concepcion.”

The court next rejected plaintiffs’ assertion that their claims for “public injunctive relief” were outside the scope of the Federal Arbitration Act (FAA) and Concepcion. The court did not decide whether such an exception actually exists because it found that KeyBank had withdrawn from the private school loan business. Although the Ninth Circuit did not directly resolve that issue, consumer advocates had been hoping that the court would overrule the numerous California district courts that have held that neither California nor any other state may exclude claims for public injunctive relief from the operation of the FAA.

Although the Ninth Circuit upheld the lender’s class action waiver, consumer advocates in other cases continue to argue that exceptions to Concepcion should be created so that consumers can bring class actions in court. Most importantly, after hearing argument in late February, the U.S. Supreme Court will decide this Term in Italian Colors Restaurant v. American Express Travel Related Services Co. whether there is a “federal vindication of rights” exception to Concepcion. Ballard Spahr submitted an amicus brief in that case arguing that no such exception exists. We also regularly counsel clients on how to keep their arbitration agreements current in light of the developing law.

Ballard Spahr’s Consumer Financial Services Group pioneered the use of pre-dispute arbitration provisions in consumer financial services agreements. It is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance. The CFS Group also produces CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau developments. To subscribe to the blog, use the link provided to the right.

For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, or Mark J. Levin at 215.864.8235 or levinmj@ballardspahr.com.


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